COLOMBO: The Sri Lankan rupee traded slightly firmer on Monday ahead of a looming policy rate decision by the central bank, as dollars flowed in from remittances, with dealers expecting inflows to help stiffen the currency, in the absence of higher imports.
The central bank will release its monetary policy rates at 0200 GMT on Tuesday and the market broadly expects the rates to be left steady at their current multi-year lows.
The rupee was traded at 130.35/38 per dollar at 0639 GMT, a tad firmer from Friday's close of 130.37/40. "The rupee is on the appreciation trend," said a currency dealer. "But there was not much activity today."
The central bank has been "giving effect to the present trend in a gradual manner", central bank Governor Ajith Nivard Cabraal told Reuters on May 9. Steady inflows from remittances and exporter conversion amid lack of importer dollar demand earlier fed the rupee's appreciation, dealers said.
They expect the rupee to face upward pressure until credit growth and imports reverse their trends.
Despite a multi-year low interest rate regime, data showed private sector credit grew 4.4 percent in February from a year earlier, the slowest expansion since May 2010, while imports in February fell 6.2 percent on the year.
Dealers said lack of credit growth and a contraction in imports could hit the economy unless the government propped up expansion through infrastructure funding.
The central bank, in its monetary policy statement last month, however, expressed confidence that private sector credit growth would rebound in the second quarter and push up the pace of economic growth.
The currency has hovered between 130.55 and 130.70 since March 3 through May 8, Thomson Reuters data showed, with the central bank intervening to smoothen any sharp volatility.
Sri Lanka's main stock index was up 0.21 percent, or 13.00 points, at 6,328.19 points by 0644 GMT.
Turnover was at 371.5 million Sri Lanka rupees ($2.85 million), with around 13 million shares changing hands.
Stockbrokers said many investors had been compelled to return to the market due to the low interest rates that have made fixed-income assets less attractive.
Comments
Comments are closed for this article.